Making Tax Digital – What You Need To Know

Making Tax Digital: What You Need to Do Now

Making Tax Digital (MTD) for Income Tax is now in effect, changing how some sole traders and landlords report their income to HMRC.

For many sole traders and landlords, the question is no longer whether MTD will apply, but when.

If you’re self-employed or receive income from property, it’s important to understand when the changes will affect you and what you need to do to prepare.

When does Making Tax Digital apply?

MTD for Income Tax is being introduced in stages, depending on your qualifying income:

• From 6 April 2026: Individuals with qualifying income over £50,000.
• From April 2027: Individuals with qualifying income over £30,000.
• From April 2028: Individuals with qualifying income over £20,000.

Qualifying income is your total gross income from self-employment and property, before expenses are deducted. If you receive income from both, these amounts are combined to determine whether you meet the threshold.

What will you need to do?

If MTD applies to you, you’ll need to:

• Keep digital records of your income and expenses using compatible software.
• Submit quarterly updates to HMRC.
• Use your software to complete your end-of-year tax return.

These changes mean that keeping accurate, up-to-date records throughout the year will become increasingly important.

Common misconceptions about Making Tax Digital

One concern for many sole traders and landlords is whether Making Tax Digital will mean more tax returns or more frequent tax payments.

David Best, Tax Manager at Lewis Brownlee, explains that these are two of the most common misconceptions he encounters when speaking to clients.

MTD does not mean you’ll need to file four tax returns a year or start paying your Income Tax quarterly.

Instead, quarterly updates simply report your headline income and expense totals to HMRC as the year progresses. They don’t replace your annual tax return, and they don’t change when your tax is due.

Understanding this distinction can help take some of the uncertainty out of preparing for the new requirements.

How can you prepare?

Whether MTD already applies to you or is due to affect you in the coming years, there are a few practical steps you can take now.

• Check your qualifying income

Review your self-employment and property income to understand when you’ll need to comply with the new requirements.

• Review how you keep your records

Consider whether your current bookkeeping processes will meet the digital record-keeping requirements.

• Choose suitable accounting software

You’ll need to use MTD-compatible software to maintain your records and submit information to HMRC. HMRC won’t be providing its own software for individuals, so it’s important to find a solution that works for you.

Making Tax Digital does not need to mean a complete overhaul of how you manage your affairs. The key is to understand when the rules apply, choose a record-keeping system that suits you and start using it consistently. Preparing early gives you time to resolve any issues before your first quarterly update is due.

How Lewis Brownlee can help

Preparing for Making Tax Digital doesn’t need to be complicated, but it’s worth getting the right systems in place early to make the transition as painless as possible.

At Lewis Brownlee, we can help you understand when MTD applies to you, review your existing record-keeping arrangements and identify suitable accounting software options.

Our Tax Manager, David Best, specialises in personal taxation and helps individuals and business owners navigate complex tax requirements with clear, practical advice.

If you’re unsure how Making Tax Digital will affect you, get in touch with David the team to discuss your next steps.